The Great Wages Grab

The TUC published a report this week The Great Wages Grab - how your pay has fallen behind for thirty years.  The report tells us that the wage share of GDP has fallen from about 59% thirty years ago to about 55% now. It adds that because of rising inequality the average worker's pay has fallen as a share of total wages (by which I think it means that the proportional gap between median and mean pay has increased).  Combining these two factors, it finds that the "average worker" is £7,000 a year worse off than they would be if the proportions had stayed constant since 1980.

The report has been welcomed by Brendan Barber and Richard Murphy, who add that increasing wages is the way to encourage growth.  Think Left agrees with them.  Seamus Milne uses the data to bolster his case for more powerful Trade Unions.  Tim Worstall in contrast is vehemently opposed to the wage share analysis: he points out repeatedly that the corporate profit share of GDP has not risen as the wage share has fallen, as the TUC implies when it says

The three decades when deregulation ruled may have been good for profits and fine for the wealthy, but the benefits did not trickle down to pay packets.

Worstall's view is that

...this is another one of those fake statistics that will be bandied around the political arena for years to come. And it’s one that needs to be killed...

Worstall is supported by data supplied by Britmouse, who remarks that

I think Tim is correct to note the (slight) rise in other income (which includes income from self-employment, so-called “mixed income”) and VAT are the significant secular trend.

For my part, I agree that looking at the wage share of GDP is not very meaningful.  I think we can do better. But first, a note on what the data represent.  They come (I think, and Britmouse says so too) from data produced by the Office of National Statistics giving the breakdown of UK GDP according to the income approach:

GDP = COE + GOS + GMI + T_{P & M} – S_{P & M}

COE: Compensation of Employees of corporations (including public sector employers); includes employers' national insurance contributions (as well as employees' national insurance and income tax)
GOS: Gross operating Surplus, roughly the gross profits of incorporated businesses after paying employees
GMI: Gross mixed income, the money that goes to non-incorporated businesses (partnerships and self-employed)
T-S: Taxes less subsidies on production and imports, the difference due to money going to the government between what it costs to get stuff to market plus profits on it, and what it sells for.  This includes VAT and duties, but not income tax.

Worstall's objection is that looking at COE as a proportion of GDP is not very meaningful if self-employed income and taxes are rising disproportionately.  I agree with him.  Let's try instead looking at COE as a proportion of GOS+COE, ie the wage costs of incorporated businesses as a proportion of their income.

COE/GDP is the line the TUC has plotted, the three lines below it are as in Britmouse's chart, but I have added the top line, which is employees' compensation as a proportion of gross corporate income (I downloaded my data here).  It shows that compensation has fallen over thirty years from about 76% to about 72% of corporate income.  So the TUC has got a point.  However, this fall had happened by 1983 - it all occurred in Thatcher's first term; I recall that the TUC was unhappy at the time.

It's interesting to look at how things changed between between 1979 and 1983.  The fall in COE as a proportion of GDP went into increasing GOS and T-S.  The increasing tax take came from an increase in VAT from 8% to 15%.  Using this money, Corporation tax was cut, so companies got to keep a larger share of GOS, and income tax was cut but National Insurance was increased, so that a typical worker got to keep a slightly larger share of COE (higher earners did better).

Since 1983, the main shift has been a modest transfer of GDP from the corporate to the non-corporate sectors.  I suppose this arises from an increasing tendency to outsource work to contractors rather than engage permanent staff.  If a worker is paid similarly either way, then this is just an artefact of the way the statistics are compiled.

So does all this represent an unfair change - a "wages grab"?  If you take money out of the corporate sector by means of taxes on production, and use it to cut income tax, it seems fair for wages to adjust downwards to compensate.  On the other hand, if you use it to cut corporation tax, it seems fair for gross corporate profits to adjust downwards.  Looking at the changes from 1979-1983 only, it does seem that corporations benefited at the expense of employees.  This I think is what the government intended: it must be gratifying for them that the shift seems to have persisted.  If you take the view that the increased net profitability of corporations has encouraged growth and made us all richer, you will quietly applaud.  If you disagree with that, then you will see it as something to be reversed.

The TUC's other contention is that the average worker's wage has fallen as a share of total wages.  I'll have a look at the data in another post.

Saving lives by making alcohol more expensive

The BBC is excited about the possible benefits of a 50p per unit minimum alcohol price in England:

The deaths of 50,000 pensioners could be avoided over the next decade if minimum alcohol pricing is rolled out in England, according to new research. The BBC's Panorama programme commissioned the research from statisticians at Sheffield University.

That's a lot of deaths avoided - 5,000 each year. I compared it with ONS statistics on alcohol-related deaths, which can be downloaded here.  According to those data, there were 3,651 alcohol-related deaths in England in 2010 among people aged 55 and over (the State Pension age in the UK is currently 65 for men, and is in the process of increasing from 60 to 65 for women, with future increases to 66 and then 67 for both sexes).

So superficially the research is claiming that well over 100% of alcohol-related deaths can be avoided.  However, the official figures include only deaths obviously related to alcohol.  The analysis here uses a broader definition of alcohol-related deaths, based on the dubious method of Alcohol-attributable fractions, and gets a number (for 2005) of 9,005 deaths among people aged 55 and over, compared with 3,347 in the ONS data.  Of those 9,005 deaths, 5,803 are in people aged 65 and over.  If you use this number, and scale it up a bit to correspond to the slight increase in ONS figures, you find that the research is claiming that a mere 80% or so of alcohol-related deaths would be avoided.

I hesitate to commit myself before seeing what the Sheffield statisticians have actually done, but my initial reaction is that their numbers are a big overestimate.  It's disappointing, but not surprising, that the BBC should report this research uncritically.

I note that the NHS itself says that a 40p per unit minimum price could reduce alcohol-related deaths in England (across all age groups) by 900 a year.  It cites what "David Cameron is reported to have said".

I believe that alcohol is somewhat poisonous.  But I see no reason to use bad statistics to prove it.
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There's one caveat, which is that the published methodology tells us that the ONS data are age-standardized, i.e. scaled to a European-standard age distribution.  In reality, there are more old people in England than in the standard, so actual deaths are higher.  (It's unclear to me whether the higher number using the AAF methodology is age standardized.)

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Update: I watched the Panorama programme Old, Drunk and Disorderly? this evening.  The 50,000 figure was quoted a few times, but no information was given about how it had been arrived at.  It was juxtaposed with an estimate of 300 lives a year being saved by the introduction of a 50p minimum price in Scotland.  Scaling according to populations that would correspond to about 3000 lives a year in England, across all age groups.

Papers and reports from the Sheffield University group are listed here, not including the research reported by Panorama.

The cars I made earlier

I took my children to the cinema on Tuesday, and was treated to an advertisement - this one - soliciting views on the appropriate plural form of the car name 'Prius'.   By way of illustration, the advert asserted that the plural of 'Octopus' is 'Octopi', but the plural of 'Platypus' is not 'Platypi'.  Which is strange, because the names mean "eight-footed"  and "broad-footed": in both cases the ending is from Greek πους.  The classical plurals would be 'Octopodes' and 'Platypodes', and the (sensible) English plurals are 'Octopuses' and 'Platypuses'.

The name 'Prius' would seem to be a Latin neuter comparative, meaning "earlier".  If so, the classical plural would be 'Priora'.  And the sensible English plural would be 'Priuses'.

I'm faintly surprised to learn from Toyota's website that voting is long since closed - did they show us the ad by mistake?  It seems hoi polloi were invited to choose between 'prii', 'prius', 'priuses', 'prien', and 'prium', and the plurality vote was for 'prii'.  My plan is to avoid any further encounter with this plural form, by means of not buying the things.

The law on rape

In among all the media chatter about Julian Assange is some important stuff about what actually constitutes rape.  Kate Smurthwaite has a good point when she wonders why this should matter to so many men.  The two she picks on in particular are Geroge Galloway, who says that

if the allegations made by these two women were true, 100 per cent true, and even if a camera in the room captured them, they don't constitute rape. At least not rape as anyone with any sense can possibly recognise it.

and Brendan O'Neill, who wrote that

in order for rape to have occurred, it is not enough to prove that the woman did not consent; we must also surely prove that the man knows she did not consent, or was utterly reckless as to the question of her consent, and carried on regardless

Both of them are entitled to their opinion as to what the law on rape ought to say.  But what's relevant to Assange's case is what the law, in England and in Sweden, actually does say.

The law in England and Wales in perfectly clear: it's laid down in the Sexual Offences Act 2003. Section 1, "Rape", states that "person (A) commits an offence if he intentionally penetrates the vagina...of another person (B) with his penis [and] B does not consent to the penetration [and] A does not reasonably believe that B consents". Section 75 goes into detail on "Evidential presumptions about consent", telling us that "the complainant is to be taken not to have consented to the relevant act...[if]...The complainant was asleep or otherwise unconscious at the time of the relevant act"

The law in Sweden is equally clear: it's given in Chapter 6 of the penal code (this is the official English translation).

"A person who ... forces another person to have sexual intercourse ... shall be sentenced for rape to imprisonment for at least two and at most six years.

"This shall also apply if a person engages with another person in sexual intercourse...by improperly exploiting that the person, due to unconsciousness, sleep, ... or otherwise..., is in a helpless state."

So one of the accusations against Assange is unquestionably rape in both English and Swedish law.
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I don't mean to comment directly on whether Assange is guilty or innocent of rape - he denies the charges, and there are questions about the case against him which can best be decided in a Swedish court.  David Allen Green has discussed the case in detail (read the comments if you want to see the other side of the argument).
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Re-reading O'Neill's piece, I'm unsure whether he means to defend Assange or just to make a more general point.  Either way, he's clearly wrong in English law: the relevant criterion for rape to have occurred is not "utter recklessness" about consent, but a lack of "reasonable belief" that it exists.  O'Neill goes on to write that "...rape must involve an intention on the part of the man to commit rape. The man must have a guilty mind - or what is referred to in law as mens rea;- in the sense that he knows he is committing rape."  This is plainly wrong too: it has never been the case that the mens rea requirement trumps the principle that ignorantia juris non excusat.

An exaggerated saving

There's a factoid popping up here and there on right-wing websites to the effect that that private-sector management at Hinchingbrooke hospital saved £1.6m on paper stationery.  Since the hospital's entire turnover is reportedly £105m, that seems wildly implausible.

In the absence of detailed accounts, one can't know exactly what's going on, but one can at least check the website of Circle, who are providing the management.  It tells us

£1.1m procurement savings banked.  £1.6m identified this year

So they've identified £1.6m savings on all procurement. It's surely impossible that the entire saving comes from the paper stationery budget. So how did this myth arise?  Well, according to the BBC, Ali Parsa, Circle's chief executive, claimed that

the company had saved £1.6m by ordering the hospital's paper supplies differently

and the Telegraph has him saying that

that on paper supplies alone they have saved £1.6 million

Which, in an editorial in the same newspaper, becomes

simply changing the way stationery was ordered, for example, saved £1.6 million

For one thing, "paper supplies" and "stationery" are not the same things. Hospitals use a lot of paper products - trays, bedpans, etc - for medical purposes.  But, more importantly, I think there's been a mistake somewhere along the way: my guess is that an assistant fed Ali Parsa with an example of something they'd saved money on, and a figure for all savings identified, and by the time he came to talk to the press he'd joined the two together.

When lying becomes a habit

Paul Ryan, the Republican candidate for the vice-presidency of the United States has attracted some attention with the dishonesty of his speech to his party's convention.  He does seem to have been particularly brazen, but I suppose it can be said in his defence that his job there was to please the party faithful, not media fact-checkers, and that's just what he's done.  And the leaders of the Democratic Party are themselves quite willing to stretch the truth when they see political advantage in it.

So whereas I am horrified by the professed beliefs of today's Republicans, and sympathetic to Barack Obama, who does lots of things I disagree with but perhaps would do much better if he had more freedom to act, I don't propose to make much of Ryan's mendacious polemics.  But I am concerned with a small, but to me significant lie he told in a telephone interview he gave ten days ago, for radio broadcast.  I quote from the interviewer's transcript (the interviewer, Hugh Hewitt, is a supporter of Mitt Romney, the Republican presidential candidate):

HH: But you did run marathons at some point?
PR: Yeah, but I can’t do it anymore, because my back is just not that great.
HH: I’ve just gotta ask, what’s your personal best?
PR: Under three, high twos. I had a two hour and fifty-something.
HH: Holy smokes. All right, now you go down to Miami University…
PR: I was fast when I was younger, yeah.

Now, running a marathon inside three hours is doesn't make you a champion, but it's a pretty good effort - Lance Armstrong ran just under three hours in his first marathon.  So running enthusiasts wanted to know more.  And they found out that Ryan has in fact run one marathon, in just over four hours.  Running a marathon in four hours is creditable enough, but it's not what you'd call "fast", so Ryan didn't just blurt out the wrong time, he clearly claimed to have been much better than he actually was.  (A spokesman has confirmed that Ryan "mixed things up".)

If you've never run a marathon you may have to take my word for this, but everyone I know who has run one (or more) remembers their (best) time quite accurately - mine is 3:15:52 .  It's inconceivable that one could misremember a time of over four hours as under three hours - the difference is huge, equivalent to knocking two and a half minutes off one's time for a mile.  (I'd welcome comments agreeing or disagreeing from any marathon runners reading this.)

Ryan couldn't have expected to gain many votes by claiming an impressive marathon time, nor if he'd thought about it could he have expected not to be found out.  The only explanation I can think of for this lie is that he'd told it so many times before that he repeated it without thinking.  That is, he's a man who's in the habit of lying about a question on which most people are scrupulously honest.  The only other politician I can think of who lies so casually is Jeffrey Archer (the British pulp novelist), who incidentally seems to have been a genuinely talented runner before getting himself locked up for perjury.

Does it matter if Ryan is a habitual liar?  Well, the vice-presidency of the United States is not usually an important office (would you recognize Joe Biden?), but there are exceptions (Lyndon Johnson, Gerald Ford).   And whereas I expect politicians to dissemble on occasions in their roles as populists and diplomats, I think it important for them to remember the difference between truth and fiction when they come to make decisions.  I suspect that George W. Bush often didn't care about that distinction.  I fear that Paul Ryan has simply forgotten.